More Conflicts For The “Independent” Foreclosure Reviews

I wrote last week in Forbes.com about PwC’s ongoing independence conflict in performing the Ally/ResCap independent foreclosure review. This conflict is disturbing, in particular, because this review is still going on. Bankrupt ResCap did not sign on to the settlement agreed to in January that put an unsatisfying and inconclusive end to the ignominious reviews.

But the bigger problem is the Fed did not comment on my findings. It’s not clear if the regulator gave PwC a waiver to do this consulting engagement because they determined, in error in my opinion, that the conflict was innocuous – PwC was the external auditor for ResCap for one of the two years of erroneous and, allegedly, fraudulent foreclosures under review – or because PwC never disclosed this conflict to the regulator.

Inquiring minds want to know…

I also have a lot of questions about the total, and by consultant, billing numbers for the disastrous reviews that have been reported.

How can Promontory, responsible for three foreclosure reviews, have billed twice what PwC billed for four reviews, more than any other consultant selected? (The consultants’ engagement letters posted by the OCC and Fed had “blob after blob of blackouts”, redactions where the billing rates should be. Did different banks get charged different rates for same services by consultants? Did Promontory charge more for senior partners to act as“coordinator” of conference calls between the “independent” consultants that did not include the regulators?)

How can Deloitte, responsible for the JP Morgan Chase foreclosure review, which was reportedly the cleanest of all the reviews with the lowest reported error rate, have charged more for that one engagement than PwC did for working on Citigroup, US Bank, SunTrust, and Ally/ResCap?

How can the overall bill for the foreclosure reviews be only $2 billion, the total reported to Senator Sherrod Brown as part of the Senate Banking Committee ongoing investigation into the consultants role? That total seems to be based on adding together only three consultants bills, when seven consultants covered a total of fourteen engagements. (Ernst & Young hasn’t reported any numbers and, yet, the firm performed two reviews independently – at problematic HSBC and MetLife – and was the primary, and probably very expensive, subcontractor to Promontory for the Bank of America. Navigant inherited the Aurora Bank engagement after Allonhill was disqualified and also performed the review of OneWest directly. Treliant Advisors was responsible for Sovereign Bank and Clayton Services is still working at EverBank.)

Finally, how can PwC testify to Congress that the firm only billed “about $425 million”, as if that were a final number, when the tab for Ally/ResCap alone, according to what ResCap told a judge in March, will be at least $300 million? (The ResCap foreclosure review is ongoing since, given the bankruptcy, ResCap did not sign up for the negotiated settlement announced in January.)

Francine, Thank you for continuing to point out the conflicts of interest and lack of resolution to the abuses in our foreclosure crisis. It is amazing that no one seems to be focused on helping the distressed homeowner receive a fair chance at a mortgage modification. It seems as though the large servicers are stalling any resolution on their loans until they can work out settlements with the RMBS investors for a fraction of the true losses to come. The proposed settlement in the Bank of America case is a good example

John, are you willing to take on cases from California from homeowners like myself who are still waiting on some sort of resolution with Rescap who was the servicer of my loan? Can I contact you in regard to suing Rescap and the OCC outside of the settlement as it is plain to see the settlement amount from any and all of the lenders who are part of this whole fiasco is completely arbitrary, with no sound basis or formula that is fair to the people who were on the foreclosing end of these deals. In some articles I have read the reviewers were told to lie about the findings? In others they were just padding the pockets of their buddies in the reviewing companies which I think was really just one in the same but the money certainly never found its way into any of the pockets of the people who were negatively impacted in this situation.

Let me know if you are willing to discuss further legal proceedings on a separate basis. Thank you and god bless

Thank you for your article. Thishas been on debacle after the next. Could you direct me to any attorneys in the Boston area with whom may have an interest delving further into the fray for the consumer?

Subscribe to my feed by email

Search

Browse Archives

About the author

Francine McKenna (@retheauditors) is the Transparency Reporter at MarketWatch.com, a Dow Jones publication, where her work is also featured frequently in the Wall Street Journal. McKenna had more than twenty-five years of experience in consulting and professional services including tenure at two Big 4 firms, both in the US and abroad before becoming a journalist. Look for her prior columns, "Accounting Watchdog" at Forbes.com and "Accountable" at American Banker. For more information, click "About" at the bottom of this page. For more information contact Francine McKenna, fmckenna@mckennapartners.com